A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results exclude amortization of acquired intangible assets, stock-based compensation expenses, facilities transition costs, revaluation of long-term liabilities and tax effect of non-GAAP adjustments.

Management Comments

"Our second quarter results came within the high end of our guidance range, reflecting the progress we are making with leading Memory and Foundry customers in several key applications," commented Eitan Oppenhaim, President and Chief Executive Officer of Nova. "We are encouraged by the traction our new technological developments are gaining in the market and are confident that our unique technical approach will support Nova's long-term growth.The first product launched as part of our new portfolio was the PRIZM™, a dimensional metrology platform, which integrates ground breaking technology allowing our customers to improve their yield and time to market in the most complex device fabrication processes," added Mr. Oppenhaim. "We believe that the industry fundamental drivers will continue generating growth opportunities for us while we strengthen our market position and competitive portfolio."

2019 Third Quarter Financial Outlook

Management provided an outlook for the third quarter, the period ending September 30, 2019. Based on current estimates, management expects:

$46 million to $54 million in revenue

$0.11 to $0.24 in diluted GAAP EPS

$0.20 to $0.34 in diluted non-GAAP EPS

2019 Second Quarter Results

Total revenues for the second quarter of 2019 were $51.1 million, a decrease of 10% compared to the first quarter of 2019 and 21% compared to the second quarter of 2018.

Gross margin for the second quarter of 2019 was 55%, compared to 56% gross margin in the first quarter of 2019, and compared to the gross margin of 58% in the second quarter of 2018.

Operating expenses in the second quarter of 2019 were $21.3 million, compared with $22.9 million in the first quarter of 2019, and compared with $22.1 million in the second quarter of 2018.

On a GAAP basis, the company reported net income of $6.5 million, or $0.23 per diluted share, in the second quarter of 2019. This is compared with $7.8 million, or $0.27 per diluted share, in the first quarter of 2019, and compared with net income of $11.8 million, or $0.41 per diluted share, in the second quarter of 2018.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, stock-based compensation expenses, facilities transition costs, revaluation of long-term liabilities and tax effects of non-GAAP adjustments, the company reported net income of $9 million, or $0.32 per diluted share, in the second quarter of 2019. This is compared with net income of $10.4 million, or $0.37 per diluted share, in the first quarter of 2019, and compared with net income of $13.3 million, or $0.46 per diluted share, in the second quarter of 2018.

Conference Call Information

Nova will host a conference call today, August 7, 2019, at 9 a.m. Eastern Time, to discuss the financial results and future outlook. To attend the conference call, please dial one of the following teleconferencing numbers. Please begin by placing your calls five minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

The conference call will also be webcast live from a link on Nova's website at http://ir.novami.com.

A replay of the conference call will be available from August 7, 2019 at 12 p.m. Eastern Time to August 14, 2019 at 11:59 p.m. Eastern Time. To access the replay, please dial one of the following numbers:

About Nova: Nova is a leading innovator and key provider of metrology solutions for advanced process control used in semiconductor manufacturing. Nova delivers continuous innovation by providing state-of-the-art high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle. Nova's product portfolio, which combines high- precision hardware and cutting-edge software, provides its customers with deep insight into the development and production of the most advanced semiconductor devices. Nova's unique capability to deliver innovative X-ray and Optical solutions enable its customers to improve performance, enhance product yields and accelerate time to market. Nova acts as a partner to semiconductor manufacturers from its offices around the world. Additional information may be found at www.novami.com.

Nova is traded on the NASDAQ & TASE under the symbol NVMI.

This press release provides financial measures that exclude amortization of acquired intangible assets, stock-based compensation expenses, facilities transition costs, revaluation of long-term liabilities and tax effect of non-GAAP adjustments and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding Nova's performance because they reflect our operational results and enhances management's and investors' ability to evaluate Nova's performance before charges or benefits considered by management to be outside Nova's ongoing operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

This press release contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to future events or our future performance, such as statements regarding, but are not limited to, anticipated growth opportunities and projections about our business and its future revenues, expenses and profitability. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in those forward-looking statements. Factors that may affect our results, performance, circumstances or achievements include, but are not limited to, the following: our dependency on three product lines; our dependency on a small number of large customers and small number of suppliers; the highly cyclical and competitive nature of the markets we target and we operate in; our inability to reduce spending during a slowdown in the semiconductor industry; our ability to respond effectively on a timely basis to rapid technological changes; our dependency on PEMs; risks related to exclusivity obligations and non-limited liability that may be included in our commercial agreements and arrangements; our ability to retain our competitive position despite the ongoing consolidation in our industry; risks related to our dependence on our manufacturing facilities; risks related to changes in our order backlog; risks related to efforts to complete and integrate current and/or future acquisitions; risks related to the worldwide financial instabilities; risks related to our intellectual property; new product offerings from our competitors; unanticipated manufacturing or supply problems; risks related to government programs we participate in; risks related to taxation; changes in customer demand for our products; risks related to currency fluctuations; risks related to technology security threats and changes in privacy laws; risks related to acquisitions we may pursue and risks related to our operations in Israel. We cannot guarantee future results, levels of activity, performance or achievements. The matters discussed in this press release also involve risks and uncertainties summarized under the heading "Risk Factors" in Nova's Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on February 28, 2019. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Nova Measuring Instruments Ltd. does not assume any obligation to update the forward-looking information contained in this press release.

(Tables to Follow)

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands) - (Unaudited)

As of

ASSETS

June 30,

2019

December 31,

2018

Current assets

Cash and cash equivalents

30,850

22,877

Short-term interest-bearing bank deposits

146,876

152,951

Trade accounts receivable

48,078

53,531

Inventories

48,976

41,786

Other current assets

8,381

10,961

Total current assets

283,161

282,106

Long-term assets

Long-term interest-bearing bank deposits

2,000

2,000

Deferred tax assets

4,217

3,873

Severance pay funds

1,157

1,394

Property and equipment, net

19,353

13,756

Identifiable intangible assets, net

8,874

10,187

Operating lease right-of-use assets

27,078

-

Goodwill

20,114

20,114

Total long-term assets

82,793

51,324

Total assets

365,954

333,430

Liabilities and shareholders' Equity

Current liabilities

Trade accounts payable

16,889

19,015

Deferred revenues

5,314

3,984

Operating lease current liabilities

3,137

-

Other current liabilities

19,460

25,079

Total current liabilities

44,800

48,078

Long-term liabilities

Liability for employee severance pay

2,044

2,254

Operating lease long-term liabilities

25,723

-

Other long-term liabilities

2,779

2,358

Total long-term liabilities

30,546

4,612

Shareholders' equity

290,608

280,740

Total liabilities and shareholders' equity

365,954

333,430

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data) - (Unaudited)

Three months ended

Six months ended

June 30,

2019

June 30,

2018

June 30,

2019

June 30,

2018

Revenues:

Products

37,401

45,784

81,462

95,969

Services

13,719

16,104

26,315

28,522

Total revenues

51,120

61,888

107,777

124,491

Cost of revenues:

Products

14,527

18,002

32,104

35,971

Services

8,483

8,186

15,979

16,463

Total cost of revenues

23,010

26,188

48,083

52,434

Gross profit

28,110

35,700

59,694

72,057

Operating expenses:

Research and development expenses, net

11,654

11,849

24,238

23,075

Sales and marketing expenses

6,641

7,442

13,787

13,673

General and administrative expenses

2,384

2,134

4,906

4,364

Amortization of acquired intangible assets

656

654

1,312

1,307

Total operating expenses

21,335

22,079

44,243

42,419

Operating income

6,775

13,621

15,451

29,638

Financing income, net

855

486

1,365

934

Income before tax on income

7,630

14,107

16,816

30,572

Income tax expenses

1,162

2,274

2,592

4,659

Net income for the period

6,468

11,833

14,224

25,913

Earnings per share:

Basic

0.23

0.42

0.51

0.93

Diluted

0.23

0.41

0.50

0.91

Shares used for calculation of earnings per share:

Basic

27,869

27,977

27,898

27,946

Diluted

28,564

28,766

28,234

28,349

NOVA MEASURING INSTRUMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands) - (Unaudited)

Three months ended

Six months ended

June 30,

2019

June 30,

2018

June 30,

2019

June 30,

2018

Cash flows from operating activities:

Net income for the period

6,468

11,833

14,224

25,913

Adjustments to reconcile net income to net cashprovided by (used in) operating activities: